What is a VA 5/1 Hybrid Arm Rate loan?

I am in the Navy and bought a house in 2007. I then refinanced to 5.5% a year later. I received a letter in the mail informing me that a 3.875% 30-year VA 5/1 hybrid arm rate loan is available to me.

It also states that this is available to me under the Veteran Benefits Improvement Act of 2008.

What is this a hybrid arm rate loan? Is this a trap?

One thought on “What is a VA 5/1 Hybrid Arm Rate loan?

  1. Hello, I am a loan officer/broker and I specialize in VA loans across the country and what you could qualify is a VA Streamline Refinance (no appraisal, no income qualifying). What you received is marketing material that was sent by a mortgage company to get you to call in, “Veteran Benefits Improvement Act of 2008” is legit, but not really any changes that are going to benifit you. Right now the 5/1 ARM is a good option for borrowers if they/you fully understand what you are getting into. First let me say that all of the “bad” ARM loans that gave ARM loans a bad name (Option ARM or Pick a payment) loans are no longer around (that is a whole different story, if you would like me to explain I would be happy to). Below are from the VA site:

    VA Hybrid ARM (Adjustable Rate Mortgage)
    The VA Hybrid ARM product provides for an initial fixed interest rate for a period of three or five years, and then adjusts annually after the initial fixed period. The 3/1 and 5/1 VA Hybrid ARM products allow a 1% annual interest rate adjustment after the initial fixed interest rate period, and a 5% interest rate cap over the life of the loan. Interest rate adjustments must occur on an annual basis, except for the first adjustment which may occur no sooner than 36 months from the date of the borrower’s first mortgage payment on the 3/1 ARM or 60 months from the date of the borrower’s first payment on the 5/1 ARM. The loan term is 30 years for either of these loans.

    The index is the weekly average yield on U.S. Treasury Securities adjusted to a constant maturity of one year. Also known as the 1-Year Constant Maturity Index. VA ARM loans have either a 2.00% margin or a 2.25% margin.

    Initial Note rate plus 5%

    One percent (1%) annually after the initial fixed rate period of 3 or 5 years

    Good and bad as you can see- if you are looking to stay in your house for over 7 years, then maybe the 5/1 ARM isn’t the best fit for you- however if you are like the majority of the people that refinance every 3 to 5 years- save the extra money and go with the 5/1 ARM. Oh, just so that you know, probably looking at a 4% on the ARM and a 5% on the 30 year fixed.



Leave a Reply